Automakers worldwide are scaling back production due to a critical shortage of semiconductors, triggered by a trade dispute involving a Chinese-owned chipmaker in the Netherlands. This situation highlights the vulnerabilities of the global automotive industry’s complex supply chains and underscores the escalating tensions surrounding the control of essential technology.
The Roots of the Standoff
The crisis began when the Dutch government seized control of Nexperia, a company headquartered in the Netherlands, in late September. This action stemmed from concerns that Nexperia, acquired by Chinese company Wingtech in 2019, could shift production from Europe to China. Documents reveal that U.S. officials had exerted pressure on the Dutch government regarding Nexperia’s ownership.
Beijing responded swiftly by halting chip exports from its factories, sending ripples of concern through the automotive sector and beyond. While initial attempts by Washington to mediate the dispute have failed, the White House announced a trade deal agreement between President Trump and China, which would resume shipments from Nexperia’s Chinese facilities. However, this promise has yet to materialize.
Why Replacing the Chips Isn’t Simple
The semiconductor manufacturing process is intricate and requires multiple stages. Nexperia’s operation exemplifies this complexity: the front-end chip production happens in Hamburg, Germany, while the vital back-end packaging and completion take place primarily in China.
To circumvent the current disruption, Wingtech would need to source locally-produced wafers in China. Nexperia, for its part, would need to expand its ability to finalize production outside of China. While Nexperia has some back-end production in Malaysia and the Philippines, it’s not enough to offset the loss of its Chinese facilities. Antonia Hmaidi, a senior analyst at the Mercator Institute for China Studies in Berlin, estimates that even with Nexperia’s financial stability, it would take at least four to six months to establish alternative production capabilities, alongside testing and certification processes before the chips can be used in automobiles.
This situation reinforces warnings from analysts who have consistently cautioned companies against concentrating production in China without robust backup plans – even if it means accepting higher operating costs to create more resilient and diversified supply chains. “This should serve as a clear warning of how far China is prepared to go to protect its own companies,” Ms. Hmaidi stated.
Broad Impact on Carmakers and Suppliers
The widespread reliance on Nexperia’s chips is reflected in the numerous automakers and suppliers announcing production adjustments. Mercedes, Stellantis, and Nissan have formed dedicated task forces to address the chip shortage and explore alternative supply sources.
Bosch, Europe’s largest automotive parts supplier, has admitted to “major challenges” and is using its global manufacturing network and alternative technical solutions. The company has even been forced to temporarily reduce the work hours of up to 1,000 employees at two German factories through a government-supported program previously utilized during the pandemic.
Nissan has confirmed production cuts at two plants in Japan, anticipating “small-scale production adjustments” impacting several hundred units at each factory. The company emphasizes that it is “monitoring developments closely” and will quickly recover once supply stabilizes, minimizing disruptions to customers.
The crisis underscores the fragile nature of global supply chains and the escalating geopolitical tensions surrounding access to crucial technologies. Resolving the dispute is crucial for mitigating further production slowdowns and safeguarding the automotive industry.
